The Biden administration has proposed a new rule that would expand overtime pay eligibility to an additional 3.6 million workers in the United States. This move revives an effort made during the Obama administration that was later blocked by the court. The new rule aims to require employers to pay overtime to white-collar workers earning less than $55,000 per year, an increase from the current threshold of $35,568 set by the Trump administration in 2019, up from $23,660.

One significant change in the proposed rule is the introduction of automatic increases to the salary level each year. This expansion of overtime protections is supported by labor advocates and liberal lawmakers who argue that wage stagnation and inflation have eroded these protections over the years. Acting Secretary of Labor Julie Su expressed her concern for workers who have been working long hours without any extra pay, earning low salaries that do not adequately compensate them for their sacrifices.

The industries that would be most affected by this new rule include retail, food, hospitality, manufacturing, and others where many managerial employees fall below the new threshold. However, the proposed rule is expected to face pushback from business groups that successfully challenged a similar regulation during the Obama administration. Some liberal lawmakers and unions have also criticized the rule for not setting an even higher salary threshold than the proposed $55,000.

Under the Fair Labor Standards Act, almost all hourly workers are entitled to overtime pay after working 40 hours a week at a rate of at least time and a half their regular pay. However, salaried workers in executive, administrative, or professional roles are exempt from this requirement unless they earn below a certain level.

According to the Economic Policy Institute, approximately 15% of full-time salaried workers were entitled to overtime pay under the Trump-era policy, compared to over 60% in the 1970s. The new rule would increase the number of salaried workers entitled to overtime pay to 27%, according to the Labor Department.

Business leaders argue that setting the salary requirement too high would worsen staffing challenges for small businesses and could lead to the conversion of salaried workers into hourly ones to track working hours. The Obama-era rule was praised by those who challenged it, while progressive groups believed it left millions of workers behind.

Some Democratic lawmakers had urged the Labor Department to raise the salary threshold to $82,732 by 2026, aligning it with the 55th percentile of earnings of full-time salaried workers. However, a senior Labor Department official stated that the new rule would bring the threshold in line with the 35th percentile, which is an improvement from the current rule but falls short of the 40th percentile in the previous Obama-era policy.

The National Association of Manufacturers has warned of potential challenges to any expansion of overtime coverage, citing disruptions to supply chains and labor supply difficulties. The new rule would extend overtime pay eligibility to an additional 300,000 manufacturing workers, 300,000 retail workers, 180,000 hospitality and leisure workers, and 600,000 workers in the healthcare and social services sector, according to the Labor Department.

President Joe Biden's proposed rule goes beyond the previous Obama-era rule that was struck down in court. The Department of Labor released the proposed rule, which would require employers to pay overtime premiums to salaried workers earning less than $1,059 per week or about $55,000 per year. Worker advocates and many Democrats have criticized the current salary threshold of about $35,500 per year as insufficient.

The proposed rule would not impact overtime eligibility for workers who are paid hourly. Jessica Looman, the head of the Labor Department office responsible for enforcing wage laws, stated that the proposed rule is necessary to ensure fair compensation for workers. Wage laws mandate that eligible workers receive one and a half times their regular pay rate for any hours worked beyond 40 in a week. Salaried workers who earn above the salary threshold may still be eligible for overtime pay if their primary duties are not related to management.

Some states, such as California and New York, already have salary thresholds for determining overtime eligibility that are higher than the current federal standard. In 2016, the Labor Department doubled the salary threshold to approximately $47,000, but a federal judge in Texas ruled the following year that this threshold was too high and could include exempt management workers who should not be subject to overtime pay protections.